Japan set to propose SE Asia initiative<\/p>\n
TOKYO (Reuters): Japan is set to propose a fresh plan to ease
\nthe pain being suffered by Southeast Asian nations, while
\nsuggesting ways to control the rapid short-term capital flows
\nthat have devastated emerging market economies, government
\nofficials and analysts said on Tuesday.<\/p>\n
Tokyo's new initiative to support Southeast Asia is expected
\nto be announced at next week's annual meeting of the World Bank
\nand International Monetary Fund (IMF) in Washington.<\/p>\n
"The focus is now shifting to how (Japan) can help ease the
\nimmediate economic problems, such as the existing debt burden, of
\nthese nations," said a senior government official.<\/p>\n
Tokyo is unlikely to revive the ambitious proposal it made
\nlast year at the same meeting -- to create a regional fund of up
\n$100 billion to support crisis-hit Asian nations -- as the
\nregion's problems have now shifted, government sources said.<\/p>\n
"The essence of the Asian economic problem has changed from
\nlast year, when the outbreak of currency crisis spurred rapid
\ncapital flight and then resulted in a current account imbalance,"
\nhe added.<\/p>\n
The current account problem has improved as capital flight
\nfrom the region has abated, but "these nations are still in
\ndistress, since improvements in trade positions were mainly
\nbrought on by falling imports, not by rising exports," he said.<\/p>\n
Government sources said Japan's proposals would include
\nactivating the regional debt market and promoting private direct
\ninvestment into the region, while giving some investments
\ngovernment guarantees.<\/p>\n
Already, Tokyo has announced that it will use trade insurance
\nto guarantee loans made by private Japanese financial
\ninstitutions to Southeast Asian nations to help them obtain funds
\nto establish infrastructure.<\/p>\n
The first case is likely to be a loan totaling 70 billion yen
\n($522 million) to Malaysia, in which Sumitomo Bank Ltd and Nomura
\nSecurities Co Ltd are involved.<\/p>\n
The financing will enable Malaysia to raise funds at lower
\ncosts than when it directly taps capital markets.<\/p>\n
Japan is also likely to express at the G-7 meeting the need to
\nprevent foreign capital from flooding Asian nations, where there
\nare varying degrees of economic development.<\/p>\n
Finance Minister Kiichi Miyazawa said on Tuesday he wanted to
\ndiscuss the idea of putting controls on short-term capital
\nmovements with his deputy Eisuke Sakakibara.<\/p>\n
He suggested he would consider middle ground between the
\nunbridled free movement of short-term capital, which has called
\ninto question the role of giant hedge funds, and the drastic
\ncapital and currency controls recently implemented by Malaysian
\nPrime Minister Mahathir Mohamad.<\/p>\n
Akira Nagashima, a former deputy governor of the Bank of Japan
\nand now executive adviser to Tokio Marine and Fire Insurance Co
\nLtd, said there was a growing international view among developed
\nnations that "moderate" restrictions on capital inflow into
\nemerging market economies would be appropriate.<\/p>\n
"I understand that Japan will take such a stance," he told
\nReuters on Tuesday. "And there is a chance that this view will
\ngather momentum, particularly for developing nations whose
\nfinancial markets are underdeveloped."<\/p>",
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